CARO 2015 - Applicability

CARO was introduced in 2003 by Government of India in consultation of ICAI (Institute of Chartered Accountants of India).

Simply put CARO is a list of parameters, details of which the company is required to submit to its auditors, on which the auditors are required to form an opinion and report the same in their Auditors Report. Main intention of introducing CARO in 2003 was to establish a transparent reporting mechanism on the most important parameters concerning various stakeholders.

Before CARO was introduced, it was a common practice of companies and dare i say, the companies auditors, to obscure the details of improtant parameters and hiding them in various technical jargons, purpose of which was to elude the non suspecting user of reports to deduce any meaningful material information from the same. To curb this practice and effecting greater transparency in companies reporting of important financial information, GOI bought out a list of Twenty one Parameters on which the company needs to give annual declarations, same needed to be verified by auditors.

CARO has evolved a lot with the need of time, from 2003 to 2015, now having being reduced only to 12 parameters from the earlier 21. Changes being brought into it keeping in mind the changing dynaminc financial environment we are in. It now comes under the domain of Ministry of Corporate Affairs (MCA)

With enough background info, lets move on to see which companies and corporates are required to comply with CARO 2015 requirements. It is applicable to -

- every company as understood in Companies Act, 2013, including Foreign companies, except the following -

Banking Company

Insurance Company

Charitable Company (Sec. 8 Company Act, 2013)

One Person Company

Private/Small Company (Capital < 50 lacs; Loan Outstanign < 25 Lacs

As we can see, the near universal application of CARO, and as we will see in our next article, the definiteveness and simplicity of parameters to be reported, is what makes CARO so effective.